YOUR INVESTMENTS: WHEN THE FINANCIAL ADVISER AND CLIENT ARE ON THE SAME PAGE

I recently met with a friend who made aliyah in the summer of 2012 with the help of Nefesh B’Nefesh. After spending no more than two minutes catching up, he started to complain that he never hears from his financial adviser who lives in New York, and he wanted to know if there was any way he could get impartial, objective advice on his investments while living in Israel. In addition, he asked if he could incorporate his other investments, both local and foreign (i.e., local stocks, real estate), into the overall advice he desires.

Fee-based consulting

Many investment advisers have started offering consulting services to their clients. The client pays the adviser an hourly fee for a consultation on his entire investment portfolio.

The adviser analyzes any stocks, bonds and mutual funds that the client is holding. To give objective advice on these holdings, the adviser also needs to gather a thorough understanding of the client’s risk profile and short- and long-term goals. As the adviser is compensated by an hourly fee, fee-only advisers can be expected to practice a greater degree of objectivity.

Objective advice 

Precisely because a fee-only adviser is paid at an hourly rate only, the primary benefit of using one is that he or she can provide objective advice. They are better able to look at your entire financial situation without being swayed by any personal benefits that may come with giving certain recommendations.

In fact, most of these advisers will provide free referrals to other professionals that the client may need (such as accountants or lawyers).

For everyone

There is a common myth that to get top-level service in the financial industry, you need to have millions of dollars before anyone will pay attention to you. The beauty of fee-based consulting is that this levels the playing field. The adviser charges the same hourly fee for a multimillionaire as he would charge for a newly married couple with limited financial means. That same new couple will receive the same level of attention as anyone else because it makes no difference to the adviser. No matter who he is working with, he will always make the same amount of money from the hourly fee.

Retirement accounts

With certain types of retirement accounts, the investor needs to make investment choices. However, as this money may be locked up, it cannot be moved into a normal brokerage account. In many cases, the investor loses substantial amounts of money because these funds were not invested correctly. Many investors with such accounts should seek the counsel of a fee-based adviser and make sure that this retirement money is invested correctly.

Do-it-yourselfers 

With the popularity of online investing, many people have taken it upon themselves to manage their own portfolios.

While they enjoy managing their own money, many people would like to receive supplementary advice, or a second opinion, to make sure that they are making proper decisions.

Fee-based advisory services are the perfect solution for this problem. The adviser will sit with the client, work on an allocation model with him and review all potential investments.

Then the client can go home and enter the trades himself, continuing to manage the portfolio on his own.

Many fee-based advisers will send reminders to clients to come in for quarterly, semi-annual or annual meetings to help keep the do-it-yourselfer on track.

Choosing an adviser 

Unfortunately, anyone can call himself a financial adviser, so it’s important to work with someone who is licensed, preferably both in Israel and in the United States. It’s important to find a fee-based adviser who you can trust. Just as your family doctor, it’s important to feel comfortable with your adviser and be able to be open with him.

One of the big advantages of working with someone local is that he will understand your personal situation and long term goals because he is familiar with the local culture and speaks your language. This will help you to get the most out of the relationship.

 

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.

 

Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA. For more information, visit www.aaronkatsman.com, www.gpsinvestor.com or email aaron@lighthousecapital.co.il.